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NZX posts 22% rise in FY profit on strong market activity

NZX posts 22 percent rise in annual profit as strong activity in capital markets offsets weaker Agri unit

By Tina Morrison

Feb. 21 (BusinessDesk) – NZX, New Zealand’s stock exchange operator, posted a 22 percent rise in annual profit as strong activity in capital markets offset a weaker performance from its Agri division.

Profit increased to $12.1 million in calendar 2013, from $9.9 million in 2012, the Wellington-based company said in a statement. The result lagged First NZ Capital’s $14 million profit estimate. NZX took a $2.6 million charge in 2013 to write down the value of investments in Clear Grain Exchange and NewsRoom.

New Zealand’s stock exchange operator has benefited the past year from a revival in companies coming to market as the government partially privatised energy companies MightyRiverPower and Meridian Energy and sold part of its holding in Air New Zealand while privately owned businesses such as Z Energy, SLI Systems and Synlait Milk also publicly listed. Still, the record year for initial public offerings and equity trading activity is unlikely to be repeated in 2014 as the government has just one asset, Genesis Energy, slated for listing and the remaining offerings are expected to be much smaller.

“Activity in New Zealand’s capital markets in 2013 was at its highest in more than a decade which clearly has a direct and positive impact on NZX’s financial performance,” chief executive Tim Bennett said. “We see a good IPO pipeline with Genesis expected in the first half of the year, however the rest of the IPO pipeline will continue to be small to mid-sized businesses that need capital to grow so we will have quite a different profile to what we had last year.”

Shares in NZX fell 0.8 percent to $1.26 and have advanced 2.4 percent this year.

Still, securities trading and clearing volumes are expected to remain robust and will benefit from the flow on effect of listings and sell-dons of strategic holdings during 2013, he said.

The company didn’t provide an explicit forecast for 2014 earnings.

In 2013, sales rose 12 percent to $62.8 million, while expenses increased 9 percent to $37 million.

The company’s capital markets business boosted revenue 18 percent to $34.9 million as it benefited from 10 new listings worth $7.5 billion. The listing fees associated with the IPOs have contributed to the latest earnings and will continue to add to annual listing, trading and clearing revenues, the company said.

Revenue from agricultural information slipped 2.9 percent to $12 million as it was impacted by severe drought conditions. Still, while revenue fell 7.6 percent in the first half, it gained 1.8 percent in the second half as the sector recovered, the company said.

NZX’s third largest unit, market operations, boosted revenue 19 percent to $11.9 million as it benefited from a full-year of the operation of the Fonterra Shareholders’ Market and its energy business gained additional revenue from development contract work for the Electricity Authority in the first half.

The company wrote down the value of its Australian Clear Grain Exchange business by $2.4 million to $4.7 million following a disappointing trading year with revenues down 22 percent. NZX also wrote down the value of Newsroom by $200,000, ahead of its sale last month.

NZX will pay a dividend of 1.6 cents a share on March 21.


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